Correlation Between Methode Electronics and FedEx
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and FedEx at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Methode Electronics and FedEx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and FedEx, you can compare the effects of market volatilities on Methode Electronics and FedEx and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Methode Electronics with a short position of FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and FedEx.
Diversification Opportunities for Methode Electronics and FedEx
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Methode and FedEx is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and Methode Electronics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Methode Electronics are associated (or correlated) with FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of Methode Electronics i.e., Methode Electronics and FedEx go up and down completely randomly.
Pair Corralation between Methode Electronics and FedEx
Assuming the 90 days trading horizon Methode Electronics is expected to generate 2.05 times more return on investment than FedEx. However, Methode Electronics is 2.05 times more volatile than FedEx. It trades about 0.25 of its potential returns per unit of risk. FedEx is currently generating about 0.3 per unit of risk. If you would invest 815.00 in Methode Electronics on September 1, 2024 and sell it today you would earn a total of 185.00 from holding Methode Electronics or generate 22.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Methode Electronics vs. FedEx
Performance |
| Timeline |
| Methode Electronics |
| FedEx |
Methode Electronics and FedEx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and FedEx
The main advantage of trading using opposite Methode Electronics and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, FedEx can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in FedEx will offset losses from the drop in FedEx's long position.| Methode Electronics vs. Southwest Airlines Co | Methode Electronics vs. Media and Games | Methode Electronics vs. NAKED WINES PLC | Methode Electronics vs. Singapore Airlines Limited |
| FedEx vs. Performance Food Group | FedEx vs. Gol Intelligent Airlines | FedEx vs. LIFEWAY FOODS | FedEx vs. Tyson Foods |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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